In this six-module course, you will learn how businesses and organizations behave in situations in which strategic decisions are interdependent, i.e. where my actions affect my competitors' profits and vice versa. Using the basic tools of game theory, we will analyse how businesses choose strategies to attain competitive advantage.
This course is also available in Chinese. Please go to our course catalog to access the Chinese version of Competitive Strategy.

OO

I had a great time with Prof. Tobias Kretschmer. The course was really eye-opening for me and gave me a lot of perspective in the business world. Looking forward to the remaining courses for sure.

SR

Mar 06, 2017

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The concepts are clear and well presented. Quiz questions are relevant to the course material. Flexible due dates make it possible to fit this course in a busy professional life.

À partir de la leçon

Why Worry About Research and Development

In the context of R&D, a number of important strategic questions arise consistently; in this module, we take a closer look at these questions. Though many innovations are created by a stroke of luck, it seems that the majority of innovations are created because their inventors actively strive towards this specific innovation and differentiation strategy.

Enseigné par

Tobias Kretschmer

Professor

Transcription

So before we have a closer look at strategic aspects, let's first clarify what we mean when we talk about innovation and research and development. There are several important aspects and distinctions, and we'll focus on these in the coming two videos. So thinking about the stages of R&D, the main distinctions are between basic research, applied research, and product development. And we'll look at those in turn. So basic research is basically the developing of scientific knowledge, basic scientific knowledge, that you can apply to a wide range of potential uses. This would be, for example, research on radio waves, which has many different applications including, but not exclusively mobile telephony. When we talk about applied research, it's about application of this basic scientific knowledge to the solution of a specific problem. So, in this case, for example, if you were interested in trying to communicate with others when there's no fixed line close by, then you're specific problem would be that. Now, you could develop a new product or a new process to do that. And in this particular example, we will think about the development of the mobile phone, of a prototype of the mobile phone, as applied research. Now, that once we go one step further, we can think about product development. Product development is about the identification of relevant consumers, and it's about tailoring these products or these processes to the needs of those consumers. So to be concrete, if you have your prototype and you adjust the size, the shape, the color of that particular mobile phone to the tastes of your consumers, that would be product development. Now how these three stages of R&D differ, is actually an interesting question. In particular, they're interesting when we think about the patentability of these products and the consequences. So, basic research has the main characteristic that the outcomes are difficult to protect. They are often subject to spillovers between firms. These could come either through publications, through publicly available publications or through contacts between the personnel of different firms. So knowledge spillover simply means that one firm learns from the activity of another. Now, that leads to, what we know is a prisoner's dilemma. So both firms would be better off, they know that they would be better off, if both of them would invest into basic research and development. But both of them would be better off, if the other firm did it on their own. So therefore, mainly basic research is done by universities, by public laboratories, or by networks of firms to get rid or to solve the problem of a prisoner's dilemma. Things are different when we talk about applied research and product development. Here, it can often be protected. Whatever you invent can often be protected by patents, copyrights, trademarks, and so on, that have the sole purpose of stopping others of using, of making use of your innovation. Therefore, given that this is protectable knowledge now, if two firms develop similar products whoever comes first, will win, and therefore, be able to gain some profit from that. This often leads what we think of as a patent race, and that is in particular where the behavior of competitors becomes very important. And that's where competitive strategy has it's main domain. So, we've just learned that there are several stages of R&D from the first scientific thoughts, in a particular phenomenon, to the final end product. Depending on the stage that we're looking at, it's more or less difficult to achieve patent protection. So consequently, there are different players involved in the different stages. And we'll keep that in mind for now and move on to the next video in which we'll introduce some further important definitions. So, stay tuned and see you in a minute.